India’s palm oil imports from Malaysia may take a hit in the current month, considering the duty structure changes announced by the government in its annual budget presented on Feb. 1. India had slashed the basic import duty on crude palm oil (CPO) to 15% from 27.5%.
The basic custom duty on soybean oil and sunflower oil was also reduced to 15% from35% in the annual budget presented for 2021/22. The government had also proposed 17.5% cess on CPO and 20% cess on crude soybean and sunflower oil.
After the changes, CPO imports would effectively attract 35.75% tax against 30.25% previously, but for crude soya oil there will be no change in the overall duty structure. Palm oil has lost the duty advantage, it had over rival oils with the duty change, and this explains why palm oil’s price fall is currently restricted as compared with soya oil. Lower import possibility shall limit the supplies in near futurehence prices are rebounding immediately, whenever there is a significant depreciation.
Another reason for the drop in palm oil imports from Malaysia will be the higher possibility of a better domestic harvest of other oilseed crops, especially mustard when compared with the previous season.
Malaysian palm oil shipments to India had been quite impressive till January 2021. In fact January month’s palm oil imports had jumped by nearly 31% over the previous year, after India lowered the import tax in November 2020, in order to curb the rising food prices.
The country imported 780,741 tonnes of palm oil last month. India in late November had reduced the import tax on crude palm oil (CPO) to 27.5% from 37.5%. India imports palm oil from Indonesia and Malaysia, while other oils including soyoil and sunflower oil are sourced from Argentina, Brazil, Ukraine and Russia.
Tightening edible oil stockpiles in top markets in India and China had kept imports healthy during later part of 2020. India purchases more than 9 million tonnes of palm oil annually, accounting for nearly two-thirds of its total edible oil imports. India had purchased a record 4.4 million tonnes of Malaysian palm oil in 2019.
